Mini-Madoff Denied Bail for Now

Nicholas Cosmo, the Long Island man accused of running a $370 million dollar Ponzi scheme, remains jailed following a bail hearing today.

While agreeing with Cosmo's attorneys the 37 year-old was not a flight risk, U.S. Magistrate Judge E. Thomas Boyle told the defense and prosecution to confer and work out a bail package together.

In a written order, the judge said the defense's proposed bail package of a $750,000 bond and travel restrictions as "totally inadequate". The judge asked any proposed bond be secured by people other than the defendant's sister and brother-in-law, as the defense had suggested, because both received income from Cosmo's company Agape. The judge, reminding the defense the government prohibits using the proceeds of a crime for bail.

Judge Boyle suggests any bail package should include restrictions on Cosmo's ability to do business over the internet, phone or any other electronic device. He also recommends home detention for Cosmo combined with 24-hour electronic monitoring.

A spokesman for Cosmo's lawyers, Stephen Feldman and Arthur Jakoby of Herrick, Feinstein, said there is no deadline for the two sides to reach an agreement on bail.

Cosmo turned himself into authorities on Monday. He has been charged with one count of mail fraud which carries a maximum 20 year prison sentence.

Prosecutors allege he took in $370 million dollars from 1,500 investors, promising them returns on their investments of as high as 60 percent. Through his two businesses, Agape World and AMA, Cosmo made short-term loans to businesses with the investors' funds, claiming they would share in the returns on those loans.

A number of clients tell CNBC they did receive income from their investments with Agape, but the money stopped coming in last summer.

Prosecutors claim Cosmo, who once served 21 months in prison for financial fraud, lost $80 million of the $370 million trading commodities and that $55 million was paid to brokers and sub-brokers who brought in clients.

In a letter prepared for the bail hearing, the defense claims what the government failed to account for the $74 million Cosmo returned to investors in 2008, the $40 million he returned to investors in 2007 and $25 million in loans Cosmo made to 17 different businesses. Fourteen of those loans are non-performing.

In a letter taped to Agape World's door the firm claimed it could no longer pay clients because the companies it had lent money to, were not repaying their debts.